While the Treasury does not propose to apply the full Directive to managers of unregulated collective investment schemes, it does propose to apply similar rules to those that are currently applicable to operators of retail investment funds.

This will include requiring those firms to appoint a depositary, says Forrester (pictured).

A Deloitte survey indicated that small hedge fund managers would be hit hardest by the Directive, with the single biggest increase in ongoing costs caused by the requirement to appoint a depositary.

Smaller hedge fund managers will be unhappy having to bear these costs, which the Directive itself requires only of larger fund managers.